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Secured Debt Consolidation???

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Anne1208
Regular Contributor

Secured Debt Consolidation???

My husband and I have about $44k in credit card debt.  We bought a house and had a baby and then I had some other health issues and then had an accident baby and a car fail on us all in about a 2 year span.  We went from a pretty good savings and no credit card debt and 800+ credit card scores in mid 2016 to right now we have these maxed out cards with terrible interest rates. I think we are paying $1150 or so a month in minimums. Really, 17k of that are low interest cards, but there is one thats 27k thats high interest. Because of the high utilization we both have like a 670ish credit scores right now. We have completely clean, perfect credit reports right now (i have student loans, we have one car loan, i have one personal loan of about $4k i used for a house item when we moved in, and our mortgage (that equity wise were only about 10% in right now).  All payments are timely and all that. only problem is the revolving utilization %/overall amount. 

 

We had a car loan on the one car - a five year loan i paid off in two.

 

We have two paid-off cars, a 2006 and a 2007 that are both (conservatively)  worth about $10-13k each.  So, lets say $22k. Our joint incomes are about 165k. Is it possible for us to get a secured loan against both cars to maybe at least cover the "big" card? if we could just get even that one thing from a $800/month payment just on mimimums, to like a $500-600 a month thats actually putting a dent in it, that would be huge, and we can devote the extra money to paying down the other, low interest cards. 

 

I just dont know where to go.  When we needed the car we got in january for which we had the car loan, i tod my husband to ask our credit union....that banks stink and theyll deny bc they always do - and fifth third did deny him. But bank of america through dealership approved him.

 

Id be inclined to ask our credit union that gave us our mortgage and the loan i used on the home improvement and that gave us the car loan i paid off early, but i dunno, im worried theyll look at our accounts right now - an empty savings, a maxed out credit union visa, one on time $4k loan and our checking, and be like meh they stink and deny us. I want to go to the right organization to get the loan, and not get turned down.



Starting Score: January 2014 Experian: 713 Equifax: 668 Transunion: 691
December 2015 Score: Experian: 766 Equifax: 751 Transunion: 759
October 2018 Score: Transunion:735


Goal Score: 800’s across the board

Take the myFICO Fitness Challenge
Message 1 of 8
7 REPLIES 7
Anonymous
Not applicable

Re: Secured Debt Consolidation???

I think you're going to be hard pressed to get any kind of a substantial loan on 11 and 12 (soon to be 12 and 13 when the 2019s come out) year old cars.

 

If they truly are worth that much (they would need to be luxury cars to even come close) I would consider selling them both and cashing in and replacing them with cars for a couple grand a piece. Also it sounds like you have 3 cars . .  can you get by with less? Sharing? Supplementing with public transportation/walking/biking/etc.? Maybe keep your paid off cars and ditch the one with the payment?

 

It feels like the CC interest is the problem, but it's actually your budget. Something is very out of whack in relation to your income. It's usually the big expenses like housing and transportation that can be changed, fix your budget, and nearly clean up everything else on your own. These are unfortunately the changes that can sting that a lot of folks are reluctant to make, but are what will actually fix things long term. More loans and debt and moving everything around rarely does much.

Message 2 of 8
Brian_Earl_Spilner
Credit Mentor

Re: Secured Debt Consolidation???

If you're asking about secured loans, I'm assuming you've already tried unsecured debt consolidation loans? Discover offers a consolidation loan and if you're score is 670, you at least meet that criteria. You can of prequalify on their site. As long as your score is over 640, you can possibly qualify for some better ones. Once you drop below, most are predatory.

    
Message 3 of 8
Anne1208
Regular Contributor

Re: Secured Debt Consolidation???

We were hoping for a secured loan, as it can provide a much better rate.  The unsecured loans for this purpose haven't been very enticing on that front - they are almost as much as the credit account.



Starting Score: January 2014 Experian: 713 Equifax: 668 Transunion: 691
December 2015 Score: Experian: 766 Equifax: 751 Transunion: 759
October 2018 Score: Transunion:735


Goal Score: 800’s across the board

Take the myFICO Fitness Challenge
Message 4 of 8
Anne1208
Regular Contributor

Re: Secured Debt Consolidation???

Thanks - yeah that is my concern - I asked my husband to call the credit union to see if there is a year limit on vehicles they'd be willing to use as collateral. The one paid off car is a jeep wrangler that is a hobby car. It's had modifications so the gas mileage is terrible.  We have no interest in selling that as the parts my husband put into it over the years are more in value than the car - and he did it with the mind to be keeping it for decades.  I can't say I would have sunk any money into a hobby like that, but he did nonetheless.

 

And we need the 07 cherokee and the 14 durango.  the 14 durango is our "new" car for which we have a loan. We paid cash for the jeep from my father in law. my husband had a company car but then changed jobs so he lost the company car.  At the same time, our 03 Altima cost in $6000 in repairs in one year. I drive 30 miles each way and just got rid of an unreliable car.  We have the 07 cherokee and the new car so that we have two reliable cars for the long commute.  We also had two babies in a year, so I have two huge carseats. The last thing I would want to do is get cheap, unreliable vehicles and be right back where I was in january, broken down on the side of the road and shelling out yet another $1000 on an old car. It's one of the reasons we have this credit card debt to begin with. 

 

My husband makes $100k but is not good with money.  I make 64$k and am great with money but I can't force him to budget better re: his income.  Our savings was depleted because we moved and had a child, and then had a surprise baby thereafter, along with veterinarian bills, a herniated disk issue for me, etc all in a twelve month span.  We  depleted our savings through several very expensive and unexpected things in a short period of time, right after we had the two we did expect - buying a house and having one baby.  I am paying $300 per child per week for daycare, because that is the norm.

 

And, our only issue is the interest on the credit card. I need to get a loan to reduce the money wasted on interest. If i had my husbands income, I could fenagle more room to pay them down, because I am maniacal with budgeting.  he isnt, and he never will be, so the wiggle room is out of my control. 



Starting Score: January 2014 Experian: 713 Equifax: 668 Transunion: 691
December 2015 Score: Experian: 766 Equifax: 751 Transunion: 759
October 2018 Score: Transunion:735


Goal Score: 800’s across the board

Take the myFICO Fitness Challenge
Message 5 of 8
Anonymous
Not applicable

Re: Secured Debt Consolidation???

I do forget just how expensive kids can be. Especially in daycare!

 

Unfortunately, those two old Jeeps aren't going to help you at all on this one IMO. They are realistically worth more like $5k maaaaaybe $7500 and getting a bank to loan on them would be difficult.

 

What I think you're going to need to do is improve your credit profile just enough to qualify for a somewhat decent rate personal loan. You can do this by paying down any nearly maxed out cards to get them in lower utilization brackets. Basically if you have cards at over 89.9% utilization, your credit report appears to be in crisis and it's really dinging your credit. You also get points for each card that is reporting $0 so if you have some small balances you can knockout that will help a lot also.

 

You'll have to make enough of a dent in things as to not appear in crisis when in loan review and perhaps you can get something for 6 or 7%. It's also possible you could qualify for 0% balance transfer offers once things aren't so dire.

 

Message 6 of 8
Kree
Established Contributor

Re: Secured Debt Consolidation???

5000 dollars might be less than the value of the vehicle.  But lets do a little scenario math.

Lets assume your APR is 22.2% and it will take you 5 years to pay down your balances to only have 5,000 left to pay.

You will have paid an extra 10,000 dollars in interest on that 5,000. 

 

So really taken 5,000 would be worth 15,000 to your finances. 

 

Point 2.  consolidation loans.  The sooner you pay down your balances, the sooner you might be able to get a consolidation loan for the remaining balances.  This could again save you many thousands of dollars in interest over a few years.

Message 7 of 8
Anne1208
Regular Contributor

Re: Secured Debt Consolidation???

Thanks.

 

Okay, this is kind of what I was thinking, too.  My husband came up with the secured loan idea, and in theory it's great bc it would have a lower interest rate.  However, age of cars + our situation makes getting approved for one, and at a great rate, tough.

 

We usually both get bonuses in January - mine last year was about $6k after taxes and his a little more.  While we have some of that reserved for certain things like paying off the last of our childbirth bills, our car insurance for the year, and starting to replenish our savings, it would be a good place to put a few thousand so that each of the cards is backed off the maximum.  On top of it, I will be getting additional licensure in my profession in the fall, which my employer said will result in a raise. So, my suggestion to my husband was to power through the last four months of the year, and then reduce the credit debt by a chunk with bonuses.  Then, we can evaluate how much more I can throw at them with my raise, plus how much more we can with the monthly hospital bill installments out of the way....if it still seems like itll be super slow and costly, we could revisit the loan issue in about february, march or so, and our creidt scores and profiles will be slightly improved by then.

 

THAT was my plan.  But my husband bless his heart is a dumba$$ about credit and doesn't get it. 



Starting Score: January 2014 Experian: 713 Equifax: 668 Transunion: 691
December 2015 Score: Experian: 766 Equifax: 751 Transunion: 759
October 2018 Score: Transunion:735


Goal Score: 800’s across the board

Take the myFICO Fitness Challenge
Message 8 of 8
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